COMMISSIONER INLAND REVENUE VS MUHAMMAD ASLAM
2019 P T D 381
[Lahore High Court]
Before Shahid Karim and Tariq Saleem Sheikh, JJ
COMMISSIONER INLAND REVENUE
Versus
MUHAMMAD ASLAM
P.T.R. No.197 of 2010, heard on 11/05/2017.
(a) Interpretation of statutes---
----Construction of statute---Beneficial legislation, curative statutes and remedial statutes---Retrospective effect of legislation---Principles---Scope---Beneficial legislation was a statute which purported to confer a benefit on individuals or a class of persons by relieving them of onerous obligations under contracts entered into by them or which tend to protect persons against oppressive acts from individuals with whom they stood in certain relations---Curative statutes were those which attempted to correct errors in proceedings particularly which sought to give effect to contracts and other transactions between private persons which otherwise would fail to produce their intended consequences on account of some statutory disability or a failure to comply with some technical requirements---Remedial statutes, on the other hand, were enacted to improve a prior enactment for some of its defects or to reform existing law to meet new situations covered by the enactment---Remedial legislation was made to supply such defects and abridge such superfluities in the Common Law as arose, either from the general imperfection of all human laws, from change of time and circumstances, from the mistake and unadvised determinations of unlearned (and even learned) Judges, or from any other cause whatever---While retroactive legislation is looked upon with disfavour, however, beneficial enactments were to be given liberal construction and retrospective effect if same were curative or remedial---In absence of express words to the contrary, remedial and curative enactments were not ordinarily construed to destroy vested rights, create new liabilities and obligations or disturb past and closed transaction.
N.S. Bindra, Interpretation of Statutes, Tenth Edition; Earl T. Crawford, The Construction of Statutes; S.M. Zafar, Understanding Statutes, Fourth Edition; S.M. Zafar, Understanding Statutes, Fourth Edition; Commissioner Inland Revenue Zone-II, Regional Tax Office, Multan v. Mrs. Ambreen Fawad Co. Pak Arab Fertilizers Limited, Multan 2014 PTD 320; Collector of Sales Tax and Central Excise, LTU, Karachi v. Messrs Pak Suzuki Co. Ltd., Karachi 2016 PTD 867 and Syed Wajid Ali and 4 others v. Globe Automobiles Ltd. and another 1993 SCMR 819 rel.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 56 & proviso---Reference to High Court---Scope---Notice for furnishing return of total income---Time limit prescribed by proviso to S. 56 of Income Tax Ordinance, 1979---Retrospective effect / benefit of proviso to S. 56 of the Income Tax Ordinance, 1979 to notice(s) issued prior to such enactment---Question before the High Court was whether insertion of proviso to S. 56 by legislative amendment, which restricted issuance of notice beyond a period of five years, was applicable to notices issued prior to its insertion vide Finance Ordinance ,2001---Held, that insertion of proviso to S. 56 was a beneficial and curative enactment as it restricted executive power to touch pocket of taxpayers thereby creating a certainty that after expiry of period of 5 years, a taxpayer would not be dragged in even if there was a good case of liability upon him and thereby said proviso would apply to notice(s) issued prior to its enactment---Reference was answered accordingly.
Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. through Chief Executive v. Collector of Sales Tax, Gujranwala and another 2008 PTD 60 and Messrs Gulistan Textile Mills Ltd., Karachi v. Collector (Appeals) Customs Sales Tax and Federal Excise, Karachi and another 2010 PTD 251 rel.
Liaquat Ali Chaudhary for Applicant.
Rasheed Ahmad Sheikh for Respondent.
Date of hearing: 11th May, 2017.
JUDGMENT
TARIQ SALEEM SHEIKH, J.---Through this judgment we intend to decide P.T.R. No.197/2010 and the connected Tax References mentioned in Schedule-A filed by the Petitioner Department under Section 133(1) of the Income Tax Ordinance, 2001, as they emanate from consolidated Order dated 22-10-2009 passed by the Income Tax Appellate Tribunal, Lahore, (the "Appellate Tribunal").
2.The Petitioner Department has urged that the following common question of law arises out of the Appellate Tribunal's Order dated 22.10.2009 that is required to be determined by this Court:
Whether on the facts and in the circumstances of the case the learned ITAT was justified to cancel the assessments made under section 62 for the assessment years 1986-87 to 1991-92 on the point of limitation whereas the assessments stood finalized on 30-06-2000 prior to insertion of the proviso through the Finance Ordinance, 2001, which places restriction on issuance of notice under section 56 beyond five years?
3.Brief facts of the case are that the Respondent is an individual who derives his income from real estate business. On the basis of information received by it, the Department initiated assessment proceedings against him. On 09-02-1998, The Assessing Officer issued statutory notices to him under Sections 56/58(1) of the Income Tax Ordinance, 1979 (the "Repealed Ordinance") in response to which he furnished returns for the Assessment Years 1986-87 through 1991-92. The Assessing Officer observed that the Respondent purchased a plot at Johar Town, Lahore, and constructed a house thereon. He confronted him with this fact and called upon him to explain the sources of this investment as also the sources of credits in his bank account. The Respondent filed his reply but the Assessing Officer found the same unsatisfactory and, vide order dated 30-06-2000 finalized the assessment under Section 62 by making additions under Section 13(1)(aa) of the Repealed Ordinance. The Respondent preferred an appeal thereagainst before the CIT (Appeals) which was dismissed vide Order dated 04.11.2004. However, his second appeal was accepted and the Appellate Tribunal annulled the orders passed by the authorities below holding that notices under Section 56 could not be issued after the expiry of five years from the end of the Assessment Year for which the return of income was due. The reference applications in hand are directed against the Order of the Appellate Tribunal which is dated 22-10-2009.
4. Section 56 of the Repealed Ordinance provided as under:
56. Notice for furnishing return of total income. The [Deputy Commissioner] may, at any time by notice in writing require any person who in his opinion, is chargeable to tax for any income year to furnish a return of total income for such year within thirty days from the date of service of such notice or income for such year within thirty days from the date of service of such notice or such longer or shorter period as may be specified in such notice or as the [Deputy Commissioner] may allow.
However, the Finance Ordinance, 2001, inserted the following proviso thereto:
Provided that no notice under this section shall be issued after the expiration of five years from the end of the assessment year for which the return of income was due.
5.Finance Ordinance, 2001, came into force on 01-07-2001 while the assessment in the instant case was finalized prior to that on 30.06.2000. The moot point is whether the proviso can be given a retrospective effect to nullify these concluded proceedings on the ground of limitation. This argument is based on the premise that the proviso in question was a remedial and curative enactment which are generally retroactive in their application. One must understand the meaning and scope of beneficial, remedial and curative legislation in order to appreciate this contention.
6."Beneficial Legislation" may be explained as under:
"A statute which purports to confer a benefit on individuals or a class of persons, by relieving them of onerous obligations under contracts entered into by them or which tend to protect persons against oppressive act from individuals with whom they stand in certain relations."
[N.S. Bindra, Interpretation of Statutes, Tenth Edition]
"Curative statutes" may be explained thus:
"Curative statutes are those which attempt to cure or correct errors and in proceedings particularly which seek to give effect to contracts and other transactions between private persons which otherwise would fail to produce their intended consequences on account of some statutory disability or a failure to comply with some technical requirement."
[Earl T. Crawford, The Construction of Statutes]
"Remedial statutes", on the other hand, are:
"The statutes which are enacted to improve a prior enactment for some of its defects or even to reform the existing law to meet the new situation covered by the enactment."
[S.M. Zafar, Understanding Statutes, Fourth Edition]
It may be added:
"A Remedial Act is defined by Blackstone, as "one made to supply such defects and abridge such superfluities in the common law as arise, either from the general imperfection of all human laws, from change of time and circumstances, from the mistake and unadvised determinations of unlearned (and even learned) Judges, or from any other cause whatever." After quoting this definition, Craies, observes this definition is too narrow for the operation of Remedial Acts and is not confined to common law, but extends also to prior enactment. What is known as Remedial Act is an Act introduced by parliament to remedy what parliament perceives to be an existing problem on account of some obscurity in the words of the statute."
[S.M. Zafar, Understanding Statutes, Fourth Edition]
7.The question as to whether beneficial, remedial or curative legislation has a retrospective effect is of vital importance. Generally speaking, retroactive legislation is looked upon with disfavour. However, beneficial enactments are given liberal construction and are given retrospective effect if they are curative or remedial. In "Commissioner Inland Revenue Zone-II, Regional Tax Office, Multan v. Mrs. Ambreen Fawad Co. Pak Arab Fertilizers Limited, Multan" (2014 PTD 320), a learned Division of this Court dilated on this issue and observed:
"11. The legal position that emerges is that general beneficial legislation is to be given liberal interpretation. However for the said legislation to have a retrospective effect, the beneficial legislation must carry curative or remedial content. Such legislation must, therefore, either clarify an ambiguity or an omission in the existing law and must therefore be explanatory or clarificatory in nature. While beneficial legislation is to be liberally interpreted, in order to advance the beneficent object of the statute, it in no manner means that "beneficial legislation" or "liberal interpretation" necessarily includes or interchangeably means retrospective application of the statute. Unless the legislation is remedial, curative, explanatory or clarificatory, it cannot be interpreted retrospectively merely on the ground that the legislation is generically beneficial in nature. Reliance with advantage is placed on "Commissioner of Income Tax v. Shahnawaz Ltd. and others" (1993 SCMR 73) and "State Bank of Pakistan v. Messrs Faisal Spinning Mills Limited" (1997 SCMR 1244).
8.For the sake of completeness, it may also be added that in the absence of express words to the contrary, the remedial and curative enactments are not ordinarily construed to destroy vested rights, create new liabilities and obligations or disturb past and closed transaction. In "Collector of Sales Tax and Central Excise, LTU, Karachi v. Messrs Pak Suzuki Co. Ltd., Karachi" (2016 PTD 867), the Hon'ble Supreme Court of Pakistan explained:
"14. An overview of the above reveals the legal position that as a general rule, the Courts look with favour upon Remedial and Curative enactments, which are beneficial in nature and are interpreted in the context of the evil to be cured and the mischief to be remedial. Its provisions are to be liberally construed so as to advance the remedy and suppress the mischief and to ensure that the legislative intent, in this behalf, is not frustrated. Remedial and Curative statues generally are retroactive in their application and apply to pending proceedings. However, in the absence of the express words to the contrary, the enactment should not ordinarily be construed to destroy vested rights, create new liabilities and obligations or disturb past and closed transactions. Needless to say that any interpretation, which offends against any constitutional provision, would not be acceptable. With regard to the judgment passed prior to the enactment of a remedial or curative statutes, the finality thereof may be disturbed and destroyed during the pendency of appeal thereagainst, if such is the intention of the Legislature, which can be fairly gathered from the express words employed in the remedial or curative enactment."
In an earlier case "Syed Wajid Ali and 4 others v. Globe Automobiles Ltd. and another" (1993 SCMR 819), the Hon'ble Supreme Court held:
"Until the judgment is final, it is subject to the power of the legislature to enact curative legislation which have to be given effect to in pending proceedings."
It is noteworthy that "pending proceedings" would mean proceedings pending at any stage starting from the Assessing Officer upto the Supreme Court of Pakistan. It would also include a reference that is subjudice before the High Court at the time when the amending law is enacted. Reliance in this regard may be placed on "Commissioner of Income Tax v. Shahnawaz Ltd. and others" (1993 SCMR 73)
9.Reverting to instant case, it would be seen that the original Section 56 of the Repealed Ordinance did not place any time limitation on the Deputy Commissioner to issue notice thereunder. Finance Ordinance, 2001, which prescribed a time limit in this regard was by all means a beneficial and a curative enactment because, to use the words of the learned another judge in "Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. through Chief Executive v. Collector of Sales Tax, Gujranwala and another" (2008 PTD 60), it restricts the executive power to touch the pocket of a taxpayers thereby creating certainty that after its expiry even if there was a good case for creation of liability he would not be dragged in.
10.In "Messrs Gulistan Textile Mills Ltd., Karachi v. Collector (Appeals) Customs Sales Tax and Federal Excise, Karachi and another" (2010 PTD 251), a similar question arose consequent upon the amendment of Section 11(4) of the Sales Tax Act, 1990. This provision was amended vide Section 12(8) of the Finance Act, 2008, to impose a time-limit of five years for issuance of show-cause notice to the person in default. No such limitation was previously there. The Court quashed the show-cause notice as also the proceedings emanating therefrom. This was despite the fact that the Court proceeded on a different reasoning. Relevant excerpt from the judgment is reproduced hereunder:
12. When we review the amendment made in Section 11(4) of the Sales Tax Act, we regret we cannot agree with the learned counsel for the Respondent that it is a substantive statute because it possesses all the characteristics of a remedial statute and in our opinion it will have retrospective operation insofar as it will apply to all proceedings which are pending on 30-06-2008 and the Honourable Supreme Court has approved with favour the obiter dicta of this Court where it was held that pending proceedings will also include proceedings pending in this Court in reference application. Even otherwise the principle that there should come a time when the matters are considered to be finalized and put to rest and the sword hanging on them is removed, is a universal principle and it has been held by the Superior Courts that where no limitation is provided for certain actions, which impair vested rights the Courts are empowered to impose reasonable limitation for carrying out such actions. We are, therefore, of the considered opinion that the period of five years provided in Section 11(4) of the Sales Tax Act for issuance of show-cause notice for default in filing of return will not only apply to all proceedings pending even before this court but the Courts can hold that this period which apparently is reasonable should apply to all the cases where show-cause notice has been issued for default in filing of return, even if no period for taking action was prescribed at the time such show-cause notice was issued.
11.In view of the foregoing, the question of law raised in the instant reference and those mentioned in Schedule-A is decided in favour of the Respondent and these applications are dismissed. Office shall send a copy of this judgment under the Seal of the Court to the Appellate Tribunal.
Schedule A
| Sr. No. | Case/Reference No. |
| 1. | P.T.R. No. 198/2010 |
| 2. | P.T.R. No. 199/2010 |
| 3. | P.T.R. No. 200/2010 |
| 4. | P.T.R. No. 201/2010 |
| 5. | P.T.R. No. 202/2010 |
KMZ/C-10/LOrder accordingly.